The other side of the BofA story,… Ken Lewis misunderstood? Here’s an article from the WSJ suggesting that Ken Lewis never really had much of choice in the Merrill Lynch affair.
Mugging Bank of America 
No good financial deed goes unpunished.
So much for being a good corporate citizen. Bank of America CEO Ken Lewis earned kudos last year for stepping into the breach when the mortgage market and Wall Street cratered. BofA’s purchase of Countrywide Financial and its September agreement to buy Merrill Lynch offered a welcome dose of optimism and private capital amid the panic.
In December, Mr. Lewis realized that he had been too optimistic. And when he considered breaking off the Merrill engagement, Washington arranged a shotgun wedding. After BofA shareholders approved the Merrill purchase on December 5, Mr. Lewis saw Merrill’s assets plunge in value and began to explore a way out. At least he wanted a better price given the erosion in Merrill’s real estate and corporate portfolio.
Mr. Lewis’s effort to protect his common shareholders was vetoed by his most important shareholder, the feds. In October the U.S. Treasury had insisted on investing $15 billion in his bank. Come December, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke told him that Merrill had to be saved, and that BofA had to be the savior…
In other words, the feds believe that the way to calm financial markets is to force the nation’s largest, and a heretofore healthy, bank to swallow toxic assets it didn’t want. In return, yesterday the Treasury agreed to invest $20 billion in BofA, for which the government will receive preferred shares paying 8%. Treasury, the FDIC and the Fed will also partially insure $118 billion in troubled assets — mostly Merrill’s. In return for this downside protection, BofA will have to render unto Caesar another $4 billion of preferred stock plus warrants…
More here.
